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"no reason to invest your money" You mean with deflation people will suddenly no longer want for more money? Sign us up!
by dnautics 5y ago
"no reason to invest your money"
You mean with deflation people will suddenly no longer want for more money? Sign us up!
- ska 5y ago> You mean with deflation people will suddenly no longer want for more money? Sign us up! No, they mean that people will want jobs and not find them. [addition: this is at least the orthodox view behind small inflation targets as policy, that on the whole it's the best trade off]
- friedturkey 5y agoJapan is said to be deflationary (until covid at least) and lacks an unemployment problem.
- ska 5y agoIs japan deflationary in real terms? Even if so I suspect the economists would argue endlessly about "other factors". Either way, I'm not saying I believe the analysis, but when economists talk about the problems of deflation they aren't afraid that people will have "enough" money.
- imtringued 5y agoIf there is no reason to invest they will want more money. Once the interest rate drops below liquidity preference the desire to hold money approaches infinity. This is known as the keynesian liquidity trap. The only solution is to implement negative interest rates on cash to neutralize the liquidity preference. Even if you have negative interest rates on money, people will flock to the next basic human need that has its own liquidity preference. Once the yield on land or property falls below liquidity preference people will hold onto empty property. The solution to the problem is to neutralize ground rent via land value taxation. Thus you have both a money cycle and a real estate cycle.
- notahacker 5y agoPeople who already have lots of money will no longer want for more money. That's not so great for the people who need to borrow it, or want a job